PR NEWSWIRE) CoSine Announces Major Cost Reduction Program
CoSine Announces Major Cost Reduction Program
Initiates Steps to Further Reduce Cash Burn, Reiterates Guidance for Q3
REDWOOD CITY, Calif., Oct. 2 /PRNewswire/ --
CoSine Communications Inc. (Nasdaq: COSN), a leading provider of network-based
IP service delivery platforms, today announced that, to more effectively
utilize its financial resources, it is reducing its workforce by approximately
14% and estimates a reduction of ongoing quarterly proforma (excluding
non-cash equity-related items and restructuring charges) expenses by 25% when
compared to Q2 2001. The Company will take a restructuring charge in the
third quarter of approximately $7.0 million or $.07 per share for the expenses
related to the reduction in workforce. In addition, CoSine will write-down
approximately $7.0 million or $.07 per share for obsolete inventories and
asset impairments related to transitioning technologies to its new SHARC
architecture, scheduled to be generally available in Q4 of 2001.
CoSine anticipates that this reduction in workforce, combined with the
cost cutting program, will create savings of approximately $8.5 million per
quarter when compared to Q2 2001. By Q1 2002, proforma earnings per share
will have improved by $.08 per quarter on a go forward basis. Part of these
savings will be achieved in Q3 2001 by the previously announced reduction in
workforce coupled with a concerted effort to reduce expenditures during this
quarter. The cutback in expenses will be accomplished by the elimination of
direct sales in markets where payback is not expected in the short term,
streamlining of manufacturing, reduction of general and administrative staff,
and the reduction of other controllable and capital expenses. This expense
reduction program will allow the Company to extend the life of its cash
resources and reduce its breakeven revenue requirement. It is anticipated
that CoSine will have approximately $190 million in cash and short-term
investments as of September 30, 2001.
"In response to continued weakness in telecommunications spending, and in
the light of a protracted economic slowdown, we believe that it is prudent to
further reduce our expenses," said Dean Hamilton, Chairman and CEO of
CoSine Communications. "This current reduction will allow us to continue our
product development while ensuring that the company will successfully navigate
through this economic weakness. With approximately $190 million in cash on
hand, at our significantly reduced cash burn rate, CoSine is well prepared to
execute its business strategy."
He continued, "We are very pleased with the strong interest in our new
SHARC technology, especially from the major global carriers, that recognize
that SHARC provides them with CoSine's rich IP value-added service
functionality accelerated in hardware to multi-gigabit speeds," said
Mr. Hamilton. "Customer response from early lab evaluations of our SHARC
technology has been very positive and we anticipate significant demand for
this technology from most major carriers. Due to the product advantages and
demand created by our SHARC technology, we anticipate reduced on-going demand
for our current generation of hardware. Therefore, we will write-down excess
inventories related to the older generation of hardware. We are currently
focused on delivering the first production release of our products using the
SHARC technology."
Mr. Hamilton also stated, "Although the recent tragic events have created
enough uncertainty to make us uncomfortable with providing guidance for Q4 at
this time, we are pleased to reiterate our guidance for Q3 which projected
revenue growth of 15-20% over Q2 and proforma EPS improvement of $.02 per
share excluding the aforementioned charges. We also anticipate cash burn of
approximately $25-$26 million for Q3 2001, down from approximately $35 million
in Q2 2001. CoSine continues to be successful in its customer evaluations and
we believe that any increased uncertainty in Q4 is due more to the timing of
closing deals than it does to the actual acceptance of the CoSine products."
"We remain committed to our customers and to the value proposition that
our product makes possible. We are enthusiastic about the expanding
opportunity for network-based IP services, especially in light of the
consistent progress of our field trials. While the market environment remains
challenging, we are confident that we have the technology and resources to
succeed." Mr. Hamilton continued, "Our executive team is paying extremely
close attention to the careful management of our financial resources and will
continue to take any action that is necessary to ensure the long-term success
and viability of our business."
CoSine will host a conference call for Q&A regarding this release,
Tuesday, October 2 at 2:00 p.m. PDT. A web hosted audio simulcast will be
available at www.cosinecom.com, as well as an archived web cast.
About CoSine Communications
Founded in 1998 and based in Redwood City, Calif., CoSine is a leading
provider of a new class of infrastructure equipment for Service Providers,
allowing them to offer value-added, secure Internet and data services to tens
of thousands of enterprise subscriber networks simultaneously. The CoSine IP
Service Delivery Platform is a combination of advanced hardware and software
in an open service application platform design that combines scalable
computing, routing and switching resources to enable Service Providers to
deliver highly differentiated, managed IP services including both IPSec and
MPLS site-to-site Virtual Private Networks (VPNs), dial-up VPNs, managed
firewalls, extranets, Secure Digital Subscriber Line (DSL), Frame Relay to
IPSec interworking, IP-enabled Frame Relay and Frame Relay over IPSec.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act
of 1995: Except for historical information contained herein, the matters
discussed in this release are forward looking statements that involve risks
and uncertainties. The company may use words such as "anticipate," "believe,"
"plan," "expect," "future," "intend" and similar expressions to identify
forward-looking statements. Our actual results may vary significantly based
on a number of factors including, but not limited to, product development,
commercialization and technology difficulties, manufacturing costs, the impact
of competitive products, pricing, changing customer requirements, timely
availability and acceptance of new products, and changes in economic
conditions in the various markets CoSine serves. We refer you to the Risk
Factors section and other information contained in the Company's filings with
the Securities and Exchange Commission.
For more information on CoSine Communications, visit our website at
cosinecom.com.
CONTACT: Dean Hamilton, Chairman and CEO, +1-650-637-4771, or
Craig Collins, Senior Vice President and CFO, +1-650-637-4785, or Investor
Relations, +1-650-628-4100, or investor.relations@cosinecom.com, all of
CoSine Communications, Inc.
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SOURCE CoSine Communications, Inc.
-0- 10/02/2001
/CONTACT: Dean Hamilton, Chairman and CEO, +1-650-637-4771, or
Craig Collins, Senior Vice President and CFO, +1-650-637-4785, or Investor
Relations, +1-650-628-4100, or investor.relations@cosinecom.com, all of
CoSine Communications, Inc./
/Web site: cosinecom.com
(COSN)
CO: CoSine Communications, Inc.
ST: California
IN: STW NET HRD
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